ISLAMABAD, Jul 27 (APP): The Trade Policy 2009‑12 aims to set the country on the path of sustainable high economic growth through exports. “The fundamental principles of the Strategic Trade Policy Framework are rooted in the manifesto of Pakistan People’s Party i.e. Growth with Equity ‑Greater Opportunities for gainful employment,Sound macro‑economic framework for trade environment, Concern with poverty eradication and environmental protection, Investing in Human resources,Targeting Poverty alleviation,Promoting private.
sector as engine of growth, Focus on small scale sector particularly in agriculture”, Makhdoom Amin Fahim Minister for Commerce said while announcing the trade policy 2009‑12 on Radio/TV here on Monday afternoon.
Makhdoom Amin Fahim said that as we all know Pakistan has been facing many difficulties on the non‑economic front, which have led to further deterioration of the business climate.
He said that the issues created due the problems which “we inherited such as energy crises, business closures, declining long term foreign investment have been worsened by the war on terror in which Pakistan is a frontline state”.
He added that the direct and indirect costs of this war do not only include the loss of life, property and business assets, but also the deterioration of country’s image as a result of which the business to business interaction becomes more difficult.
However after a critical phase of weak domestic macroeconomic situation and reduced external demand owing to the global financial crisis, Pakistan economy is now undergoing a recovery phase, he remarked.
Coming to the trade performance of Pakistan, the year 2008‑09, he said that the year witnessed unprecedented economic downturn especially in our major markets of export i.e. USA & EU. Consumption decreased in the developed world and the global trade shrank by 9%.
Global recession adversely affected exporting countries and Pakistan is no exception to it. Exports from Pakistan declined to US$ 17.8 billion as compared to previous year’s exports of US$ 19.1 billion.
Imports also witnessed a relative decline and fell by 13% as Pakistan’s imports during 2008‑09 stood at US $ 34.9 billion as compared to US $ 40.4 billion in 2007‑08.
During 2008‑9, he said the export of Textiles, which account for around 54% of Pakistan’s total exports, dropped from US$ 10.6 billion to US$ 9.6 billion.
The major losers in this regard were Readymade Garments, which dropped by 21.7%, Cotton Yarn, which dropped by 15%, Bed linen, which dropped by 10.2%, Art Silk & Synthetic Textiles, which dropped by 22.1% and Cotton Fabric by 4.0%. The exports of finished leather and leather manufacturers dropped from US$ 1.1 billion to US$ 0.8 billion registering a drop 24.5%.
The Rice exports have registered an impressive growth from US$ 1.84 billion to US$ 1.99 with an increase of 8.2%. Engineering goods also registered an increase of 26.1% from US$ 211.3 to US$ 266.4 million.
In this regard, the major contributors have been the specialized machinery, transport equipment, electric fans etc.
The export of Jewelry also rose from US$ 213.4 million to US$ 288.4 million, registering an increase of 35%, he added.
The Commerce Minister said that taking a long term view of Pakistan’s export performance over the last ten years, Pakistan’s share in the global market, according to WTO data, has declined by more than 1/3 to 0.13% in 2009 from 0.21 % in 1999.
Minister for Commerce Makhdoom Amin Fahim observed that during the last few decades, the global trade has undergone a major structural change as far as the product composition and geography of trade is concerned.
“There has been an explosion of non textile manufactured exports at the global level. Whereas, the share of non‑textile manufactured in Pakistan’s exports has gone down from an already low figure of US $ 5.83 billion (25.08%) in 2007‑08 to US $ 3.12 billion in 2008‑09 (17.32 %)”.
The Minister said that at the same time, our competitor economies, particularly in Asia, have significantly enhanced their share in non‑textile manufactured.
“As far as the Textile and Clothing sectors are concerned, the rate of growth in clothing is much higher than textiles in the international market. Whereas, Pakistan, managing to keep its market share in textiles to an extent, has been slow in benefitting from the expansion in higher value Clothing sector”, he remarked.
He said that the principle reason for this growing disconnect between the evolving global market structure and our export performance is the erosion of the competitiveness of Pakistan’s traditional exports in general and the country’s weakness in diversifying its product and market mix.
In view of the above situation, the government,he said in a true democratic spirit, took all stakeholders on board and has devised a strategy to go all out to remain firm in these difficult economic times, keep focused on our strengths, and convert challenges into workable opportunities. Trade Policy 2009‑12 aims to set the country on the path of sustainable high economic growth through exports.
Mr. Fahim said that the fundamental principles of the Strategic Trade Policy Framework are rooted in the manifesto of Pakistan People’s Party i.e., ‑Growth with Equity,Greater Opportunities for gainful employment,Sound macro‑ economic framework for trade environment,Concern with poverty eradication and environmental protection, Investing in Human resources,Targeting Poverty alleviation, Promoting private sector as engine of growth, Focus on small scale sector particularly in agriculture.
He said that as guided by the prime minister and his cabinet, this policy is geared towards: Contributing towards poverty alleviation, Achieving export led growth and providing relief to the common man through the provision of jobs and services, will focus strongly on development and facilitation Ladies and gentlemen, the policy is set in a three years Strategic Trade Policy Framework (STPF), which “we strongly hope would result in the enhancement of export competitiveness of Pakistan to enable Pakistani companies overcome the shocks of international economic crisis through a set of integrated and holistic policy and measures.
The minister unveiling the Strategic Trade Policy Framework for the next three years, said that it will be a medium term road map in order to ensure certainty of policies which in turn will act as a catalyst in the revival of domestic commerce and international trade in Pakistan, with the precise objective of bringing about a structural transformation in Pakistan’s exports.
The Minister for Commerce said that “We have to bear in mind that this trade policy comes in the backdrop of a number of challenges”.
These challenges, he said include:Infrastructure deficit, particularly in energy, Poor innovation and technological infrastructure, Low labour productivity, low levels of manufacturing value addition, little Foreign Direct Investment in manufacturing and exportable sectors, anti‑export bias in taxation, increasing costs of exports as compared to imports, lack of product and geographical diversification in exports, absence of economies of scale in the production processes, especially in the Small and Medium Enterpris sector which accounts for a vast majority of the enterprises in the country.
Minister for Commerce said that his Ministry realizes that “we need a paradigm shift to enable our firms and entrepreneurs to become globally competitive and export those products which are valued more in the international market”.
This, he said would involve structural transformation in the form of increased mobility of labor and capital across sectors and change theirproduction processes and ultimately the content of exports.
“We hope that we would be able to begin effecting this transformation through the Strategic Trade Policy Framework 2009‑12, with Competitiveness Development at the centre of all our trade promotional efforts and interventions.
Very soon, we should be able to see Pakistan producing and exporting a more sophisticated and diversified range of products, resulting also in an increase in returns for sectors ready to embrace the global competitive environment”.
The Minister said that as far as the enhancement of the export competitiveness is concerned, the government aims to: first, overcome the most pressing supply‑side constraints such
as the shortage of energy, cost of capital and difficulties linked with adverse travel advisories.
Second, he said is to enhance competitiveness of textile and clothing, with the help of Textile Policy due to be announced shortly which focuses on new investments, modernization of machinery and increasing total factor productivity.
Third, he said is to deepen and diversify export markets particularly our major trading partners US and EU as well as countries with which Pakistan has signed a free trade agreement such as China, Malaysia and Sri Lanka.
Fourth,he said is to promote trade in services which globally have a more stable demand pattern and are less prone to detrimental external shocks seen for the case of commodity trading.
Fifth,he said is to embark on domestic commerce reform and development where key areas such as wholesale and retail trade, storage and warehousing, transport, regulatory environment, promotion of modern business and taxation practices require immediate attention.
Mr. Fahim said that in order to address our strategic objective of increasing the sophistication level of Pakistan’s exports products and enhance firm level competitiveness, our government aims to:Integrate the local productive capacity with globally integrated supply chain.
Coordinate and leverage the skill up‑gradation programmes in the priority sectors and strengthen the institutions entrusted with the skilling. In this regards, skilling of women workers would be given special importance.
Acquire and upgrade technology level so that Pakistan can move away from the traditional and low value export products.
Promote enterprise and entrepreneurship development. The Ministry of Commerce proposes to set up an Enterprise and Entrepreneur Fund [EEF] for incentivising the improvements in firm management capabilities in ten sectors chosen to push Pakistan higher on the sophistication ladder.
Rationalize the tariff policy keeping in view the structure of value addition in various industries.
The Commerce Minister further said that in order to address our strategic objective of product diversification for Pakistan’s exports our government aims to:
Provide a clear policy framework on the development of chemical sector. Continue the successful initiatives provided to the Pharmaceuticals sector in the previous trade policy and help introduce necessary regulatory and initiate new development programmes.
Address the supply side constraints in the meat and meat products industry Facilitate the foreign direct investment and export potential of mineral sector.
Promote agro‑processed exports Support the light engineering sectors to export more in high paying markets. The trade policy aims to create a special fund of Rs
2.5 billion for product development and marketing in order to increase the sophistication level of the sector and realize true potential of this sector.
Devise a medium term strategy to boost exports of gems and jewellery.
Devise a comprehensive long term strategy for significantly improving Pakistan’s export of services. Provide incentives to facilitate technology acquisition, adoption, replacement with the twin objectives of energy efficiency and environmental protection To launch a comprehensive Leather and leather products export Plan in consultation with the major players of leather sector and to launch a comprehensive plan for the promotion of export of Services The Commerce Minister said that in order to address our strategic objective of pursuing greater market access through extensive trade diplomacy the government aims to:Actively participate in the Doha Development Agenda negotiations in orderto maximize the gains from trade diplomacy.
Making free trade agreements a success in terms of increase in bilateral and regional export volumes with favorable terms of trade for Pakistan.
Engage with the larger trading partners like US and EU for greater market access and utilize the Reconstruction Opportunity Zones for providing zero duty facility for exports to US and to strengthen and utilize the trade officers better for the protection and promotion of Pakistan’s commercial interest abroad.
Minister for Commerce Makhdoom Amin Fahim said that enhancing export competitiveness of Pakistan would largely depend upon the quality of governance and management structures deployed to implement it.
He said that in order to address our objective of institutional reform for prudent implementation of Strategic Trade Policy Framework the Ministry of commerce would take the following measures:
We would employ the modern logical frameworks to implement and evaluate different interventions and initiatives of the Strategic Trade Policy Framework and would establish 3 Implementation Management Units.
We would set up an Export Investment Support Fund to channelize the public investments to the selected sectors with clear objective of effecting the structural transformation.
My Ministry would ensure significant improvements in its own working as well as in the working of Transport and Trade Facilitation Project, Trade Development Authority of Pakistan, National Tariff Commission, Pakistan Institute
of Trade and Development, Pakistan Horticulture and Export Development Board, Directorate General of Trade Organizations, Trade Offices Abroad and other relevant organizations.
The Ministry of Commerce would establish efficient steering and coordination mechanisms that make the functional linkages between the Structural Trade Policy Framework with the Planning process in Pakistan and relevant line and sectoral ministries My Ministry would lead from the front in shaping muchmore effective Public‑Private dialogue in the realization of the Objectives of the Strategic Trade Policy Framework.
As far as the monitoring and evaluation of the Strategic Trade Policy Framework is concerned, the Pakistan Institute of Trade and Development Islamabad, an independent policy think tank of the Ministry of Commerce, would undertake a systematic evaluation of the impact of Trade Policy 2009‑12 on the trade performance of Pakistan with a view to enhance the effectiveness of different trade policy interventions, suggest course corrections and lay the scientific foundations for the preparatory work for the next Trade Policy.
As far as giving an export target for the coming years is concerned, the Minister said that the Ministry believes, on the basis of an extensive consultative process, that there is a consensus among all the stakeholders in Pakistan’s international trade that the country’s exports can become an engine of growth and prosperity in Pakistan, if the relevant institutions, both in public and private sector implement a holistic strategy to enhance competitiveness of exports.
However the growth during 2009‑10 would remain rather sluggish partly due to slowdown in global demand and also due to the fact that all the programmes and measures of Strategic Trade Policy Framework would have a brief time lag before coming into full force.
The Ministry therefore has set the export growth target of 6 % for 2009‑10 and 10 and 13 % for each of the successive years.
The Ministry for the first time is introducing a few intermediate indicators, which contribute to the enhancement of export competitiveness. It is expected that by 2012 the competitiveness ranking of Pakistan will improve from 101 to 75; the share of engineering exports will increase from 1.5 % to 5 %; value addition of cotton to increase from US $ 1000 to $ 1500 per bale; and regional trade to expand from 17 to 25 %.
The Strategic Trade Policy Framework, he said has sets out the policy guidelines and identifies the principle action areas.
“We hope to complete the work on identifying the business processes to improve within the first quarter of the financial year and address them forthwith. For the realization of other strategic objectives we hope to take the stock of the on ground situation and propose the activities which would start rolling out within the second quarter. We strongly hope that the activities and programs thus started would be completed by June 2012. But we have not ignored the pressing supply side issues and other legitimate requirements of the export sector and are hereby suggesting several measures to facilitate exports”, he remarked.
The Minister said that businesses need short to medium term certainty in the interest rate for investment.
Currently, there is no policy instrument provided by the government or private sector for providing finance at fixed interest rates for a short to medium term.
It has been decided to create a Fund to hedge markup rate hikes. The Ministry will work with the Ministry of Finance and State Bank of Pakistan towards this end.
He said that in order to ensure predictability of electricity supply it has been decided that Ministry of Water and Power would work with the Electricity Distribution Companies, to enter into agreements with clusters of industries whereby electricity is supplied at mutually agreed times. The agreements would have punitive and compensation clauses; and the compensation could be in the form of electricity charges credit.
The provision of insurance cover for visiting buyers can go a long way in restoring the investor’s confidence. These days, the purchasers, inspectors and sourcing agents of overseas buyers are reluctant to travel to Pakistan and the exporters ave to meet them in other countries, This increases cost of doing business. It has been learnt that apart from travel advisories that stop the purchasers/importers from coming to Pakistan but also the fact that the insurance companies refuse to cover the period of stay in Pakistan on usual rate of premium. To overcome this problem, it has been decided to launch a scheme for picking up the full cover for Pakistan for their valid insurance policies. The scheme will be funded from Export Investment Support Fund and managed by National Insurance Corporation, he remarked.
